Chocolate makers go head-to-head

Two of the biggest chocolate makers in the UK are to launch
products which will directly compete with some of each other's
biggest brands - an indication, perhaps, that the rich vein of new
product innovation of the last few years may be drying up?

Britain is the biggest chocolate market in western Europe, with
sweet-toothed Brits each munching their way through some 10kg of
the stuff each year, according to market analysts
Datamonitor​. Countlines are the most popular products,
accounting for 45 per cent of total volumes, and as a result much
of the new product innovation in recent years has centred on this
sector.

Some of this innovation has centred on products which cater for
an increasingly health-conscious public (Nestlé recently lauched a
low-carb version of its Kit Kat and Rolo bands, for example), but
the health trend appears to have had little real impact on
chocolate sales in the last year: the British Biscuit, Cake,
Chocolate and Confectionery Alliance, which represents the
industry, said that chocolate sales grew by 5.3 per cent last year
to £2.5 billion.

But the latest moves by two of the largest companies in the
market - home-grown favourite Cadbury and Swiss giant Nestlé -
suggest that growth may be harder to come by in the future and the
best line of attack will be to try to steal market share from
rivals.

For Cadbury has unveiled plans to launch a new product targeted
fairly and squarely at Kit Kat, for year's the top-selling
countline bar in Britain, helped by extensions such as the low-carb
variant, bite-size Kit Kat Kubes, single-finger Kit Kat Chunky and
limited-edition flavour variants such as orange and mint and more
unusual variants such as Masala and Cumin.

Cadbury's Dairy Milk Wafer has been created specifically to
compete head-to-head with Kit Kat, at the same time playing on the
enormous popularity of the Dairy Milk name, which has already seen
other Cadbury brands such as Wispa and Caramel converted to the
name, according to Datamonitor.

"Cadbury's decision to take on Kit Kat shows the company's
confidence in its existing brand extension formula,"​ said
Datamonitor. "The strategic risk of pulling its well-known
brands under one umbrella has paid off. Cadbury clearly feels that
this concept has room for growth, especially as brand extensions
are easier to get off the ground than new product
launches."​

But Nestlé is not taking the challenge lying down, and has come
up with a product of its own which will rival Dairy Milk. Nestlé is
to launch a new chocolate bar called Blue Label which will compete
directly with Dairy Milk, and retail for around 50 pence less than
the Cadbury Brand.

Nestlé Rowntree's Graham Walker, speaking to The Grocer​,
claimed: "We are the ones who are leading the innovation in this
category and it is us - not our competitors - who will continue to
drive its growth."​ Yet such copycat product launches do little
to support this claim, and suggest that R&D at both Nestlé and
Cadbury is beginning to stagnate.

Yet, as Datamonitor suggests, there are still untapped areas for
both companies to explore in more detail. "Cadbury has failed to
address any of the current mega trends, such as healthy eating
on-the-go snacks, with this launch [of Dairy Milk Wafer]. By
leveraging the Cadbury brand to a greater degree in this area, it
could further build on the success of its Dairy Milk family,"​
the analysts commented.

If more product launches of this nature appear on the market,
there is a real risk of cannibalisation - companies will not grow
the market as a whole but rather simply swap their own brands for
their rivals' - and this spells bad news for a market whose image
is likely to become increasingly tarnished as obesity levels rise
and 'junk' food opponents become even more vociferous.